Siltronic with strong Q3 2021
The business performance of Siltronic AG (SDAX/TecDAX: WAF) continued to improve in Q3. Wafer area sold exceeded the already high level of Q2 2021, with sales rising by 8.9 percent to EUR 371.6 million compared to Q2 2021. Sales in the 9-month period from January to September 2021 increased significantly by a good 11 percent compared to the prior year.
“The growth in wafer area in 2021 is exceptional. On the one hand, we see catch-up effects from 2020 and, at the same time, high investments in digitization. In addition, our market share is slightly increasing," said Dr. Christoph von Plotho, CEO of Siltronic AG.
Business Development in Q3 2021
Siltronic generated sales of EUR 371.6 million in Q3 2021, an increase of 8.9 percent compared to Q2. The increase was driven by wafer area sold, but average selling price in invoice currency and the development of the euro/US dollar exchange rate also contributed to growth. In Q3, the euro averaged at 1.18 against the US dollar, around 2 percent weaker than in Q2 (1.21). Sales in Q1 and Q2 2021, had already exceeded the respective previous quarters significantly, mostly driven by the development of wafer area sold.
In the first nine months of 2021, the company generated sales of EUR 1,028.8 million, an increase of 11.5 percent year-on-year. The growth in wafer area sold was so strong that the burden from the euro appreciation of around 7 percent against the US dollar was significantly overcompensated (average exchange rate 1.20 in Q1-Q3 compared to 1.12 in Q1–Q3 2020).
Cost of sales increased in Q3 2021 quarter-on-quarter due to the increase in sales volumes. However, this increase in cost of sales was significantly lower than the increase in wafer area sold. Depreciation had no significant impact on the development of cost of sales.
In the first nine months of 2021, cost of sales amounted to EUR 716.0 million, an increase of EUR 60.2 million compared to Q1-Q3 2020. The increase of EUR 60.2 million is primarily volume-related and secondly caused by higher planned depreciation of around EUR 13 million. Excluding depreciation, manufacturing costs per wafer area decreased significantly as a result of economies of scale and productivity increases, which typically coincide with increasing sales volume. This was accompanied by successful cost-cutting measures which reduced cost of sales along with positive exchange rate effects. Rising electricity prices increased costs slightly at the end of Q3.
Gross profit in Q3 2021 was EUR 119.0 million, 13.1 percent above Q2. Gross margin rose from 30.8 percent to 32.0 percent.
EBITDA increased by 13.8 percent quarter-on-quarter to EUR 122.9 million. EBITDA margin grew from 31.7 percent in Q2 to 33.1 percent in Q3.
On a nine-month comparison, EBITDA is 21.8 percent higher than last year. From January to September 2021, EBITDA added up to EUR 322.6 million. This includes additional expenses of around EUR 6 million due to the tender offer from GlobalWafers.
EBIT in Q3 increased by 20.6 percent to EUR 83.9 million compared with Q2. In the first nine months of 2021, EBIT reached EUR 207.6 million (Q1-Q3 2020: EUR 163.8 million).
Siltronic generated a net income of EUR 73.6 million in Q3 2021. Earnings per share were EUR 2.15 compared to EUR 1.83 in Q2 2021.
Net income for the nine months period was EUR 195.9 million, of which EUR 169.5 million were attributable to Siltronic AG shareholders. Earnings per share were EUR 5.65 compared to EUR 4.19 in 2020.
Development of equity, capital expenditure, net cash flow and net financial assets
With equity of EUR 1,192.2 million at September 30, 2021, Siltronic AG's equity ratio was 54.9 percent compared to 45.4 percent at December 31, 2020. The EUR 320.4 million increase in equity is primarily attributable to the net income of EUR 195.9 million for the first nine months of 2021 less the dividend payment of EUR 60 million and the decrease in pension obligations of EUR 166.5 million.
The decrease in pension obligations was the result of interest rate developments in Germany and the USA. As of September 30, 2021, pension provisions in Germany were discounted at 1.19 percent (December 31, 2020: 0.69 percent). In the USA, the interest rate rose from 2.07 percent to 2.42 percent.
In the first nine months of 2021, Siltronic invested EUR 143.8 million in property, plant and equipment and intangible assets (addition to fixed assets). These investments mainly relate to epitaxy capacity, capabilities and the expansion of the crystal pulling hall in Freiberg. In Q3 2021, Siltronic entered into a long-term lease agreement for a piece of land for the new 300 mm fab in Singapore. The present value of the expected lease payments is included in the balance sheet items "Right-of-use asset" and "Lease liability" at approximately EUR 47 million each.
In Q3 2021, net cash flow amounted to EUR 70.1 million (Q2 2021: EUR 43.3 million). In the first nine months of 2021, net cash flow was EUR 141.2 million (Q1-Q3 2020: EUR 96.3 million). In terms of customer prepayments, inflows exceeded repayments by EUR 14.2 million.
Net financial assets increased by EUR 106.1 million. Main influences were the inflow from the positive free cash flow of EUR 155.4 million and the outflow from the dividend payment of EUR 60.0 million to the shareholders of Siltronic AG.
Finalization of international plans for global minimum taxation lead to further risks
In the Siltronic Annual Report 2020, the main risks are presented in the Risk Report (pp. 48 to 57). Siltronic has listed significant changes to the risk assessment due to the announced new 300mm fab in Singapore in the H1 report.
In Q3 2021, further risks surfaced from the specification of international plans for global minimum taxation. In particular, an agreement was reached by 136 countries on October 8, 2021 to introduce new tax frameworks for international enterprises. The taxation principles in almost all countries are to be adjusted by the end of 2023 in such a way that tax benefits due to investments will become much smaller than before. Due to Siltronic's high level of investment activity, the company receives tax benefits. If the tax benefits decrease to a significant extent, the tax rate will rise.
There are currently no known risks that could endanger the continued existence of the Company.
Forecast for 2021 substantiated
Demand for wafers of all diameters continues to be strong. Siltronic is running at full capacity in all lines. Overall, wafer area sold in H2 will exceed the level of H1, as already forecast.
Siltronic has substantiated its full-year guidance for 2021 for sales and EBITDA margin. Previously, the company assumed a sales increase of more than 10 percent compared to 2020 and an EBITDA margin of 30 to 32 percent. Sales are now expected to increase by a good 15 percent and the EBITDA margin at around 32 percent, which is at the upper end of the forecast.
"Currently we do not see any surprises in terms of wafer area sold in Q4. The euro is trending slightly weaker against the US dollar and will have less of an impact on sales and EBITDA in H2 than initially assumed. However, for the full year 2021, the strong euro will have a negative impact compared to 2020. The construction of our new 300 mm factory in Singapore kicked off. With this fab, we are supporting our customers' expansion plans and, by investing in this cost-efficient fab, we are setting the course for Siltronic's continued successful future," said von Plotho.
The investment of around EUR 2 billion until the end of 2024 for the construction of the new fab in Singapore is the largest investment in Siltronic's history. A large part of the investment will be made in 2022 and thus in an early phase of the project. The new 300 mm fab will be the most modern fab in the Siltronic Group and will produce monocrystals as well as polished and epitaxial wafers. With the new leading-edge production capacities, the company will further strengthen its position as one of the technology leaders.
Completion of merger with GlobalWafers likely to be delayed due to protracted discussions with authorities on regulatory clearances
As published in the ad-hoc announcement on October 22, 2021, Siltronic expects that the merger with GlobalWafers will likely not be completed in the current financial year due to protracted discussions regarding regulatory clearances. GlobalWafers and Siltronic continue to discuss constructively with the authorities on the terms of the outstanding clearances.
Conference call for analysts and investors
The Executive Board of Siltronic AG will hold a conference call with analysts and investors (in English only) on October 26, 2021 at 10:00 am (CEST). This call will be streamed via the Internet. The audio webcast will be available live as well as on demand on Siltronic’s website.
The Q3 interim statement and the latest investor presentation are also published on the Siltronic website.
This press release contains forward-looking statements based on assumptions and estimates of Siltronic’s Executive Board. Although we assume the expectations in these forward-looking statements are realistic, we cannot guarantee they will prove to be correct. The assumptions may harbor risks and uncertainties that may cause the actual figures to differ considerably from the forward-looking statements. Factors that may cause such discrepancies include, among other things, changes in the economic and business environment, variations in exchange and interest rates, the introduction of competing products, lack of acceptance for new products or services, and changes in corporate strategy. Siltronic does not plan to update the forward looking statements, nor does it assume the obligation to do so.
The contents of this press information refer equally to men and women. To aid readability, the male pronoun has been used (e.g. he/his).